‘By no means is a boom expected but the pressures to finance large deficits will be eased’
By Vyash Nandlal
THE Covid-19 Pandemic posed many challenges and shocks to the global economy and impacted the domestic economy severely.
The lockdown measures instituted had a dramatic effect on business income, employment and economic growth. This was a global phenomenon, as production of goods and services declined sharply in response to global demand. Combined with this, was a collapse in energy prices by April 2020, when energy prices plummeted, even reaching to negative levels.
This twin shock of the Covid-19 pandemic and the energy price collapse, rocked the Trinidad and Tobago economy and impacted every citizen and business.
According to IMF data, our economy declined by 7.4% in 2020.
Faced with the impact of a sharp economic decline and severe erosion of revenues, the government embarked on a multipronged approach to not only tackle the deadly Covid-19 pandemic but keep the economy afloat amidst this economic storm.
In the height of the lockdown, the focus was on protecting the most vulnerable and an unprecedented social and economic support package was unveiled consisting of income support, food support, business loans, liquidity support and social development grants to name a few.
Public servants continued to be paid while in lockdown and the essential elements of the economy, such as manufacturing, energy production and agriculture, continued to grind on.
The difficult task at hand for the minister of finance was funding this necessary expenditure in the face of declining revenues while managing the risk of debt. A delicate balancing act of savings withdrawals and cautious borrowing, to fund the necessary expenditure, to keep the economy and citizens afloat, had to be done.
Despite significant withdrawals for budgetary support, as most countries in the world with sovereign wealth funds were doing, the Heritage and Stabilization Fund balance at the end of 2021 stood at US $5.7 Billion, higher than it was in 2015. Our net debt gradually increased to 81.7% of GDP at the height of the pandemic and recent data from the Central Bank indicates that it appears to be trending down. Compare this to regional and more advanced countries internationally whose debt to GDP is well over 100%, placing them in high-risk territory.
Now that we have fully reopened our economy, where do we stand in this post-pandemic era?
Our economic health card does not look very badly, for a country, like most others, which has endured the hardships, brought about by the Covid-19 pandemic.
The IMF projects that our GDP in 2022 will grow by 5.4%, if realised, this will be our highest growth rate in over a decade.
The minister of finance recently indicated, that in the third quarter of 2021, the period when we began opening up, GDP increased by over $5 Billion from the previous quarter and potentially $10 Billion from the previous year.
Persons are returning to work as businesses ramp up activities in response to pent up demand. The CSO is estimating a major uptick the non-energy sector in the latter part of 2021 and it can be reasonably expected that this trend will continue into 2022.
These are all clear indicators that a recovery is underway.
The Russian invasion of Ukraine has exacerbated the already established trend of rising commodity prices, which along with supply chain issues, contributed to rising inflation. This appears to be the major risk to the global economy and T&T is not immune.
Headline inflation has inched up to 4.2% in February 2022 which is still manageable, yet cause for concern as the upward trajectory is expected to continue, given the continued rise in international prices.
The knock-on effect, domestically will accrue to our energy sector and eventually will positively impact government revenue, providing some breathing space.
By no means is a boom expected but the pressures to finance large deficits will be eased.
With higher prices internationally for natural gas, crude oil, ammonia, methanol and other downstream chemicals, the opportunity exists for these local producers to increase production to pre-pandemic levels or greater.
In response to expected rising food prices due to external supply side issues, government has communicated its intention to focus on increasing domestic production. This is the best way to mitigate these developing risks.
As the global economy emerges from the Covid-19 pandemic, it is confronted with the risks of high inflation, through commodity prices and increased geopolitical risks, caused by the Russian war in Ukraine.
T&T will have to navigate these risks, however, it is clear, that we have come out of the pandemic, to quote the prime minister, “bruised but not defeated”.
In confronting the challenges ahead, enormous opportunities emerge, as the west seeks to wean itself off Russian oil and gas. T&T, may once again see itself becoming a player in this new global dynamic, as was evident in a recent CNN interview with our minister of energy.
Prudent economic management and policy direction dictates that countries be nimble enough to quickly assess developing global changes and flexible enough to alter strategies to take advantage of these opportunities.
Vyash Nandlal hold a Bachelor’s degree in Economics and an MSc in International Finance. He has more than 12 years’ experience in the field of economic research and analysis. He currently works as an economic researcher and advisor in the Office of the Prime Minister and sits on the boards of several state and non-profit organisations. The opinions and comments expressed by him are not necessarily those of AZP News, a Division of Complete Image Limited.
Economic Survival in Post Covid for T&T
‘By no means is a boom expected but the pressures to finance large deficits will be eased’
THE Covid-19 Pandemic posed many challenges and shocks to the global economy and impacted the domestic economy severely.
The lockdown measures instituted had a dramatic effect on business income, employment and economic growth. This was a global phenomenon, as production of goods and services declined sharply in response to global demand. Combined with this, was a collapse in energy prices by April 2020, when energy prices plummeted, even reaching to negative levels.
This twin shock of the Covid-19 pandemic and the energy price collapse, rocked the Trinidad and Tobago economy and impacted every citizen and business.
According to IMF data, our economy declined by 7.4% in 2020.
Faced with the impact of a sharp economic decline and severe erosion of revenues, the government embarked on a multipronged approach to not only tackle the deadly Covid-19 pandemic but keep the economy afloat amidst this economic storm.
In the height of the lockdown, the focus was on protecting the most vulnerable and an unprecedented social and economic support package was unveiled consisting of income support, food support, business loans, liquidity support and social development grants to name a few.
Public servants continued to be paid while in lockdown and the essential elements of the economy, such as manufacturing, energy production and agriculture, continued to grind on.
The difficult task at hand for the minister of finance was funding this necessary expenditure in the face of declining revenues while managing the risk of debt. A delicate balancing act of savings withdrawals and cautious borrowing, to fund the necessary expenditure, to keep the economy and citizens afloat, had to be done.
Despite significant withdrawals for budgetary support, as most countries in the world with sovereign wealth funds were doing, the Heritage and Stabilization Fund balance at the end of 2021 stood at US $5.7 Billion, higher than it was in 2015. Our net debt gradually increased to 81.7% of GDP at the height of the pandemic and recent data from the Central Bank indicates that it appears to be trending down. Compare this to regional and more advanced countries internationally whose debt to GDP is well over 100%, placing them in high-risk territory.
Now that we have fully reopened our economy, where do we stand in this post-pandemic era?
Our economic health card does not look very badly, for a country, like most others, which has endured the hardships, brought about by the Covid-19 pandemic.
The IMF projects that our GDP in 2022 will grow by 5.4%, if realised, this will be our highest growth rate in over a decade.
The minister of finance recently indicated, that in the third quarter of 2021, the period when we began opening up, GDP increased by over $5 Billion from the previous quarter and potentially $10 Billion from the previous year.
Persons are returning to work as businesses ramp up activities in response to pent up demand. The CSO is estimating a major uptick the non-energy sector in the latter part of 2021 and it can be reasonably expected that this trend will continue into 2022.
These are all clear indicators that a recovery is underway.
The Russian invasion of Ukraine has exacerbated the already established trend of rising commodity prices, which along with supply chain issues, contributed to rising inflation. This appears to be the major risk to the global economy and T&T is not immune.
Headline inflation has inched up to 4.2% in February 2022 which is still manageable, yet cause for concern as the upward trajectory is expected to continue, given the continued rise in international prices.
The knock-on effect, domestically will accrue to our energy sector and eventually will positively impact government revenue, providing some breathing space.
By no means is a boom expected but the pressures to finance large deficits will be eased.
With higher prices internationally for natural gas, crude oil, ammonia, methanol and other downstream chemicals, the opportunity exists for these local producers to increase production to pre-pandemic levels or greater.
In response to expected rising food prices due to external supply side issues, government has communicated its intention to focus on increasing domestic production. This is the best way to mitigate these developing risks.
As the global economy emerges from the Covid-19 pandemic, it is confronted with the risks of high inflation, through commodity prices and increased geopolitical risks, caused by the Russian war in Ukraine.
T&T will have to navigate these risks, however, it is clear, that we have come out of the pandemic, to quote the prime minister, “bruised but not defeated”.
In confronting the challenges ahead, enormous opportunities emerge, as the west seeks to wean itself off Russian oil and gas. T&T, may once again see itself becoming a player in this new global dynamic, as was evident in a recent CNN interview with our minister of energy.
Prudent economic management and policy direction dictates that countries be nimble enough to quickly assess developing global changes and flexible enough to alter strategies to take advantage of these opportunities.
Vyash Nandlal hold a Bachelor’s degree in Economics and an MSc in International Finance. He has more than 12 years’ experience in the field of economic research and analysis. He currently works as an economic researcher and advisor in the Office of the Prime Minister and sits on the boards of several state and non-profit organisations. The opinions and comments expressed by him are not necessarily those of AZP News, a Division of Complete Image Limited.